MIND Technology's Q2 2026 Earnings Call: Contradictions Emerge on Backlog, Energy Market Trends, and Parts Revenue Growth

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 10, 2025

Financials Results

• Revenue: $13.6M, up ~35% YOY
• Gross Margin: 50%, improved sequentially and YOY
• Operating Margin: Approximately 20% (operating income $2.7M vs $1.4M prior year, up ~86% YOY)

Guidance:

• FY26 results expected to be similar to FY25.
• Expect positive adjusted EBITDA and profitability in each remaining FY26 quarter and full year.
• Backlog $12.8M as of July 31; two pending orders totaling ~ $10M viewed as imminent (not yet in backlog).
• Aftermarket strength and cost efficiencies expected to maintain favorable gross margins.
• Market visibility limited; customers cautious; expect 2026 plans to firm up in coming months.
• Huntsville expansion ramping through FY26, supporting capacity and aftermarket growth.
• Revenue growth likely lumpy; high single-digit YOY possible, subject to delivery timing.

Business Commentary:

* Financial Performance and Market Conditions: - MIND Technology reported Marine Technology product revenues of $13.6 million for Q2 Fiscal 2026, up approximately 35% from the same period a year ago. - This growth was driven by increased Seamap revenues from system sales and growing contributions from aftermarket activities.

• Backlog and Order Activity:
• The backlog of firm orders as of July 31, 2025, was approximately $12.8 million, compared to $21.1 million as of April 30, 2025.

• The decline is partially due to substantial deliveries made this quarter, with expectations for future order conversions to replenish the backlog.

• Gross Profit and Margins:

• Q2 gross profit was $6.8 million, representing a gross profit margin of 50%, an improvement both sequentially and year-over-year.

• This was attributed to a greater proportion of spare parts and other aftermarket activity in product mix, along with higher revenue absorbing overhead costs.

• Aftermarket Revenue Trends:

• The aftermarket business accounted for approximately 68% of total revenues in the first half of Fiscal 2026.
• The expansion of the aftermarket is supported by an increased installed base of Seamap products, with higher margins due to the absence of discounts typically associated with full system orders.

Sentiment Analysis:

• Management returned to profitability, with revenue up ~35% YOY and gross margin at 50% “improved both sequentially and year-over-year.” They are “bullish on the balance of this fiscal year” and “expect to achieve positive adjusted EBITDA and profitability in each of the remaining quarters of fiscal 2026 and on a full year basis.” While noting customer caution and limited visibility, they highlighted a solid backlog, imminent ~$10M orders, and expanding capacity in Huntsville.

Q&A:

• Question from Tyson Bauer (Kansas City Capital Associates): Was parts/services about $7M in Q2, any Huntsville catch-up, and is that a good run rate?
  Response: Approx. $7M is in the ballpark; no Huntsville catch-up; trend is upward but quarterly levels will fluctuate.

• Question from Tyson Bauer (Kansas City Capital Associates): Why did backlog fall to $12.8M from $21.1M despite deliveries and new orders—any cancellations?
  Response: No cancellations; aftermarket orders flow through and can affect backlog timing; the ~$7M estimate may not be exact, explaining the variance.

• Question from Tyson Bauer (Kansas City Capital Associates): For FY26 vs FY25, how many full systems are needed and how confident are you given timing of new orders?
  Response: Guiding to a similar year as FY25; two system orders totaling ~$10M are imminent; delivery timing can swing $2–4M per quarter.

• Question from Tyson Bauer (Kansas City Capital Associates): Are Scandinavian annual orders on their usual schedule or more cautious?
  Response: Market is cautious with some seismic softening and delayed CapEx commitments; long-term offshore outlook remains bullish.

• Question from Tyson Bauer (Kansas City Capital Associates): Policy headlines on offshore wind, rare earths, and deep-sea mapping—what’s the real demand impact?
  Response: U.S. offshore wind slowed, but activity continues elsewhere; customers conduct diverse surveys; policy uncertainty adds caution but long-term demand is positive.

• Question from Ross Taylor (ARS Investment Partners): How do the ATM and buyback align with your acquisition strategy and dilution considerations?
  Response: Pursuing tuck-in, additive products/divisions close to core to minimize risk and dilution; ATM provides optionality, buyback enables rapid capital deployment when appropriate.

• Question from Ross Taylor (ARS Investment Partners): Status and potential of the partnership with the innovative mapping newcomer?
  Response: Project is underway and progressing; expected to be additive—potentially a few million dollars—with products sold to existing customers.

• Question from Ross Taylor (ARS Investment Partners): What will Huntsville add and how meaningful could it be?
  Response: Could add around 10%+ to revenue over time via third-party repairs, contract manufacturing, and Seamap support; U.S. location aids security, cash flow, and tax efficiency.

• Question from Ross Taylor (ARS Investment Partners): Is high single-digit revenue growth a reasonable expectation despite lumpiness?
  Response: Yes, high single-digit growth is plausible; timing and delivery lumpiness remain the key swing factors, with unmet deliveries reflected in backlog.